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Tuesday, 6 September 2011

UK's M6 toll is a public policy success that should be repeated

In the dying years of the previous Conservative government, the Major government advanced the biggest private toll road project in modern history for the UK. It opened in 2003 (6 weeks ahead of schedule) and is the M6 toll. It is an eastern bypass of the busiest part of the M6 motorway that runs through the city of Birmingham, and was designed to relieve congestion by providing a fast route between the north and south. Its official website is here with all of the details of how it handles customers and the toll rates.

Midland Motorways Ltd is the company that owns it and has the right to charge any toll it wishes on the 27 mile road. It had a 53 year concession to do so which started in 1998 when construction finally began. It is wholly owned by Macquarie Infrastructure Group. Tolling is manual, with a non-standard DSRC tag system which automatically opens the barriers (and offers a modest discount to users).

M6 toll in relation to other untolled motorways around Birmingham

The road cost £900 million to build, all private money. However, opposition to the road has come from two diverse sources. Motorists who want to use it for free, and environmentalists who perversely think a new road, not used much, is somehow worse than one heavily used.

Some anti-toll advocates claim the road has been a failure, because it is carrying far less traffic today than was anticipated. The Sunday Mercury claims that traffic level are now just 34,900 a day, compared to a peak of 54,700 in 2006. Forecasts had been for 74,000. The same paper quotes the usage of the parallel untolled M6 at 200,000 vehicles a day, indicating the M6 toll has taken a healthy 15% off of the existing route.

The standard price for a car is £5.30 during weekdays, £4.80 during weekends and £3.80 overnight. Trucks pay up to a multiple of twice that, indicating that is the business being sought. Anti-toll advocates claim it would be better for the government to buy out the road from the owner (who has shown no interest in selling) and make the road toll free. Of course, the British government with public debt approaching 90%, is hardly in a position to buy a toll road and make it revenue free. Similarly, Macquarie appears in no hurry to bail out of an investment that has many years left to run, even if it is generating poor returns for now. It blames the economic climate for poor demand and Midland Motorway Chief Executive Tom Fanning notes:

"It remains a matter of choice for the driver but over 40,000 drivers benefit from the ease and reliability of the M6 Toll every week day. If the M6 Toll did not exist, road users would instead be adding to the existing congestion on the M6".

Quite.

For the taxpayer, it is a thoroughly good deal. The state owned untolled M6 has less congestion because of those motorists willing to pay to use the toll road. The M6 tollway exists, as an option for motorists, and those who choose to use it have an option they didn’t have before. Nobody loses, and those seeking a free ride might ask why taxpayers should buy them a free road.

More peculiarly, the Friends of the Earth objected to the road because of its underuse, claiming building it was a waste, that the owners will seek to encourage development near the motorway to generate traffic and the money spent on it should have gone on better public transport. Given the money came from private investors, Friends of the Earth appeared unable to distinguish money that isn’t their own and taxpayer money.

The M6 toll is a success. New road capacity built without taxpayers’ money, financed privately, now funded by users. It will always be there, and if it is no longer financially viable, then the owners will have taken a risk that resulted in new infrastructure built, and whoever takes it over will face seeking to maximize revenue – which is a factor of getting the price right to attract the greatest number of users paying the highest yield. Finally, there are no pot holes or congestion on this private toll road, perhaps it is a lesson about the advantages of letting the private sector develop roads.

The lesson of this road is that the UK could do more. Additional capacity at the Dartford Crossing, a new A14 bypass and dare I say, new tunnelled bypasses in London, all might be viable as tolled private roads if the political climate was to remove regulatory barriers to letting investors develop such routes. However, in all cases such roads would be more attractive if people did not have to slow down or stop to pay for them. Congestion in the UK indicates the public demand for road space is high, and tolling will be one way to moderate that demand on any new capacity built to ensure it is sustainable.

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What is road pricing?

Road pricing is any system that directly charges motorists for the use of a road or network of roads. Traditionally it has meant tolls on single routes, particularly crossings such as bridges or tunnels. More recently it also includes area, cordon and zone pricing of urban areas, and distance and time based charging of whole networks. It does not include fuel or tyre taxes, or taxes on ownership or purchase of road vehicles.